Ex-gratia payment for superannuitant in receipt of overseas pension

Legislation:
Ombudsmen Act 1975
Related legislation:
Social Security Act 2018
Agency:
Ministry of Social Development
Ombudsman:
Peter Boshier
Case number(s):
429683
Issue date:
Format:
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Language:
English

Request by superannuitant for ex-gratia payment for deduction of voluntary component of overseas pension from New Zealand superannuation – Ministry of Social Development failed to advise superannuitant of discretion to defer commencement of deduction of voluntary component of overseas pension – Ombudsman recommended ex-gratia payment in recognition of time and effort by complainant in seeking back-payment, and further delay by MSD in making back-payment

Background

The complainant was a New Zealand superannuitant who had lived in the United Kingdom (U.K.) and had made voluntary payments into the U.K.’s state pension system, which were over and above the compulsory contributions required by law in the U.K.

When the complainant started receiving New Zealand superannuation in 2009, the Ministry of Social Development deducted the full value of his U.K. pension from his New Zealand superannuation, including the portion that he had funded voluntarily. This was as required by New Zealand law. However, in 2014, the complainant heard through word of mouth that the Ministry was able to defer the deduction of the portion of his U.K. pension that had been funded by voluntary contributions.[1] In other words, he could keep that part of his U.K. pension. The complainant therefore asked the Ministry to exercise this discretion. The Ministry stopped deducting the voluntary portion of his U.K. pension from that time. The Ministry also later paid him two lump sum payments, which totalled over $40,000, in recognition of the value of the voluntary portion of his U.K. pension which the Ministry had deducted over a number of years previously.

The complainant believed he had still been financially disadvantaged, and sought interest on the value of his back-payment. When he complained to the Ombudsman, an investigator sought to resolve the issue informally with the Ministry. This resulted in an additional offer by the Ministry of an ex-gratia payment of $3,000. The complainant was not satisfied that this was sufficient recognition of the loss he had suffered as a result of the deductions to his superannuation over a number of years.

Investigation

The Ombudsman notified an investigation into the adequacy of the ex-gratia payment offered to the complainant by the Ministry.

The Ombudsman considered the circumstances surrounding the back-payments to the complainant, and the extent to which the Ministry was responsible for the complainant’s loss of the voluntary portion of his U.K. pension. He noted that in 2005 in another case, the Social Security Appeal Authority had directed the Ministry to exercise its discretion to defer the commencement of the deduction of the voluntary portion of an overseas pension from the person’s New Zealand superannuation. The Ministry subsequently began exercising this discretion routinely when specifically requested by an applicant, but did not take active steps to make all applicants for superannuation aware of the existence of this discretion.

When the complainant applied for New Zealand superannuation in 2009, the Ombudsman observed that Ministry staff should have been aware of and trained in the Ministry’s discretion to defer deductions of the voluntary portions of an overseas pension, and should have advised the complainant accordingly. However, it did not. As such, the Ombudsman considered that the complainant’s loss was due to an administrative error by the Ministry, and warranted recognition via an ex-gratia payment. The Ombudsman also noted that the Ministry should have made a greater effort to identify and inform people in the same position as the complainant, of the existence of its discretion to defer deductions.

The Ombudsman considered that the time and effort required by the complainant in seeking the back-payment, and an unacceptable delay by the Ministry in processing the arrears payment, meant that the Ministry’s offer of a $3,000 ex-gratia payment was inadequate.

Outcome

The Chief Ombudsman formed the final opinion that the offer of a $3,000 ex-gratia payment was unreasonable because it did not sufficiently recognise the financial loss, stress and inconvenience suffered by the complainant and recommended an additional payment of $2,000. The Ministry accepted this recommendation.

This case note is published under the authority of the Ombudsmen Rules 1989. It sets out an Ombudsman’s view on the facts of a particular case. It should not be taken as establishing any legal precedent that would bind an Ombudsman in future.


[1] At the time, this discretion was contained in section 70(2) of the Social Security Act 1964. The relevant law is now contained in sections 187 – 191 of the Social Security Act 2018, and clause 121 of the Social Security Regulations 2018.

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